Beware the new walled gardens

The lack of third-party verification offered by the big digital players is a concern. But an industry source, who agreed to speak to NZ Marketing under the condition of anonymity, believes marketers also need to be wary of the walled gardens being put in place at agencies.

The source says it’s become common for some of the bigger holding companies to set up independent programmatic offerings that they own and operate within the group.

In some instances this can become problematic, the source says, because you have what amounts to media arbitrage.

“You’ve got a media agency body buying space, sitting on it and selling it on to clients for a margin. Back in the day, this was called space farming and it was outlawed. This included things like agencies buying up stacks of billboards and onselling them. Space farming is not how we do business, and yet, the norm, at least in certain agency programmatic units, is that model.”

The counter-argument to this, of course, is that the agency is taking on all the risk by buying the inventory and should, by virtue of this, be allowed to make a return out of that. But the source rejects this reasoning because it essentially removes the objectivity of the media agency, which is meant to act in the best interests of the client.

“You’re not making an independent investment decision. You’re making a decision based on the inventory you’re trying to get rid of rather than what’s best for the client.”

The source says many clients are being caught up in these scenarios because they don’t fully understand how programmatic providers make money and therefore don’t know what questions to ask.

This is part of the reason he encourages marketers not to put pen to paper before asking the following four questions of an agency:

1. What demand-side platforms (DSPS) are we actually using?

2. Is there any financial benefit, direct or indirect, to the agency in using these DSPS?

3. What’s the ownership of the DSP? Is there any shared ownership at a holding company level?

4. If there are charges being added for technology and data, what specifically are you paying for?